justifying intervention
Uncertainty over where a participant will be positioned in the league table means that executive decisions
on energy-saving investment are delayed, with the loss of potential savings both to the organisation
in terms of reduced energy costs and to the climate change campaign by holding back reductions.
The fraction of that premium to be recy- who should be making the investments “In addition, the CRC should encourage
cled back to participants when the al- that will reduce carbon emissions. UK leadership in respect of the EU’s vol-
lowance is surrendered is determined on Uncertainty means that executive de- untary commitment to a 20% improve-
an entirely linear basis, so that opera- cisions are delayed, with the loss of po- ment in energy efficiency by 2020
tions at the very top of the league will tential savings. The lack of clarity is (within the “EU 20/20/20 package”).
receive £1.20 per tonne: those near to constraining the kind of investment “By incentivising cost-effective action
the mid-point will receive a correspond- which the architects of the CRC sought in the EU ETS sector, the CRC is also
ingly smaller amount. to promote. designed to create the policy conditions
The problem is that no participant can for more stringent upstream EU ETS
determine where it will be located in the
Intervention justified by analysis
caps in the future. Government will take
‘first division’ until the other players in into account the views of the Commit-
the same part of the table have gone A comprehensive impact assessment of tee on Climate Change in setting the CRC
through the same process. the CRC scheme published in October caps, acknowledging that greater emis-
This concept of relative positioning 2009 puts forward a justification for gov- sion reductions could be realised through
and, with it, the inability to calculate ernment intervention. Barriers and mar- more ambitious caps.”
the bonuses to be received from the pot, ket failures, it maintains, mean that cost-
run counter to natural justice. effective abatement measures are not
Every participating organisation being taken amongst the high energy
Setting targets
should be able to determine the bonus users being targeted by the CRC. “. . . In Will CRC work in practice? The target
which it can expect as the result of its addition, the carbon price for those parts group covers emissions corresponding
achieving particular levels of half hour of the sector not covered by EU Energy to about 53.2 million tonnes of carbon
metering and qualifying for the Carbon Trading Scheme is relatively low and dioxide per year, and the government
Trust Standard. Its rewards should be does not reflect the marginal cost of takes the view that currently available
absolute rather than relative. meeting our emissions reduction targets. energy efficiency measures could save
“Without Government intervention at least 1.3 MtCO2 per year cost-effec-
Acting against natural justice
meeting our targets would be more tively by 2015; the figure rising to 3.2
costly, as the cost-effective abatement MtCO2 per year by 2020.
Taking that point further, the price to be identified by analysis would not be re- Whitehall wants to cut emissions from
paid for carbon allowances is a de facto alised. This policy will overcome this the target group by incentivising invest-
tax, albeit one held for six months under issue through the combination of a cap ment in energy efficient technologies
the scheme and then repaid with the vari- and trade system allied to a reporting and systems, and by encouraging the
able bonus or minus a variable penalty mechanism that will raise the profile of business and the public sectors to im-
(for participants in the lower half of the the prevailing carbon price.” prove their energy management and re-
table). Adam Smith put forward certain duce their energy consumption.
principles, or canons, 230 years ago as The CRC will force large organisations
the basis of an equitable taxation system.
CRC objectives
into taking those steps. It may indeed
The canon of certainty can be ex- By way of establishing the ground rules achieve those potential outcomes. But
plained in Smith’s own words: The tax for the CRC, the impact assessment sets it will not in the process win the hearts
which each individual is bound to pay out the policy objectives and the in- and minds of the executives across busi-
ought to be certain and not arbitrary. The tended effects of the scheme. ness and the public sector.
time of payment, the manner of payment, As the report notes, “The CRC’s objec- With their co-operation and encour-
the quantity to be paid, ought all to be tives are to encourage carbon savings agement – driven by sight of the bottom
clear and plain to the contributor and to within large organisations, primarily by line – there are almost no energy saving
every other person.” driving uptake of cost-effective end use targets that could not be achieved.
As a matter of fiscal policy, the CRC energy efficiency measures and fuel Threatening participants with large pen-
league table clearly fails the canon of switching – in order to help the UK meet alties and criminal sanctions for non-
certainty. More serious is that it is creat- its medium and longer-term greenhouse compliance only plays to the gallery of
ing uncertainty on the part of the people gas emission reduction targets. world opinion. §
14
14
The Informed Executive
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56